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European Directive issued in response to Class Actions

21 April 2021

Incidences of Class Actions in European courts have seen a rise in numbers with significant claims against Mastercard and VW grabbing the headlines.

In response to the increase in Class Actions, the EU’s Representative Action Directive - series of minimum standards for consumer collective redress - passed into law in December 2020 and while the UK does not have to implement it as it only came into force after the end of the Brexit transition period, there are implications for the legal system on this side of the Channel.

If EU Member States start to see increasing representative actions in national courts, then collective actions and group litigation orders in the UK may, as result, increase.

Expert opinion suggests the Directive is likely to further accelerate the momentum towards class actions in Europe as the new procedural devices are intended to better facilitate collective redress. These mechanisms often operate on an opt-in basis, but there is also an expansion of U.S.-style opt-out devices.

As a result of the  EU’s  Directive the 27 member states now have two years to introduce it into national law and a further six months before the new rules must be applied.  The areas affected include general consumer law, data protection, financial services, travel and tourism, environment and energy, telecommunications, digital services and product liability.

At the start of last year the Dutch Act on the Resolution of Mass Claims in Collective Action (Wet afwikkeling massaschade in collectieve actie) (Dutch acronym: WAMCA) entered effect, introducing the possibility of claiming damages on a collective basis under an opt-out regime for Dutch residents and an opt-in regime for parties residing abroad.

Under the WAMCA, claimants can file for monetary damages within Dutch class action procedures that relate to events on or after 15 November 2016. A judgment in a class action is binding for all Netherlands’ residents who fall within the group for which the claim organization is taking legal action.

Before a substantive hearing of the class action can take place, the claim organization must demonstrate that the class action is more efficient and effective than bringing an individual claim. Under the WAMCA, one regime will cover class actions in the Netherlands, irrespective of whether or not the claim relates to monetary damages.

The purpose of the EU Directive is to enable "qualified entities" (ie consumer bodies that represent the collective interest of a group of consumers) to seek redress through representative actions in national courts of respective Member States against infringements of specific, consumer-related provisions of EU law. The European Parliament and the Council consider that such measures are necessary to counter increasing risks to consumers due to widespread digitalisation and globalisation.

Businesses dealing directly with consumers will face an increased risk of litigation in the EU under the new regime introduced by the Directive. Essentially, it empowers consumers to bring actions and seek recovery where previously they may not have had the means or the appetite. The Directive will return to the European Parliament, who should approve the Council's position before the end of this year with a predicted substantial effect in the middle of 2023.

As a result of this move, claimant law firms are taking advantage of these developing procedural mechanisms and are being increasingly aggressive.

W Denis Europe offer high limits of indemnity to protect businesses against various types of class actions. Policies are available for General Public and Product Liability, Product Recall, Medical Malpractice, Professional Indemnity, Management / Directors & Officers Liability and Environmental Liability Insurance etc. For any enquiries, please contact Vida Jarasiunaite at or on +370 5 205 8234.

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